maximum allowed to contribute for a 17 year old.

[Guest jdyw]

What is the maximum dollar amount that our 17 year old can contribute to a Roth IRA? He only works part time in the summers ( gets $1000 each Christmas from Grandparents also for investing). Is it dollar for dollar in regards to his earned income with a max of $2000? Would the same hold true for his 18 year old brother with same history? I am new at investing so I hope that this makes sense.

[John G]

A teenager must have "earned income" to qualify, and this generally means payroll earnings that generate a W-2. In some cases, income from newspaper routes or babysitting can be claimed on the 1040 and could qualify. The max amount you can contribute in 2002 is $3,000 while you still can contribute up to $2,000 for last year. Yes, it is dollar for dollar with the ceiling or earned income, which ever is lower controlling. A married teenager (probably does not apply here) could qualify based upon spouses income just like other adults.

Gifts, dividends and capital gains are not "earned income".

Not ever custodian will allow someone under 18 to have an IRA, but many will set up an account typically with the parent as custodian.

Note: as long as the child is qualified, the amount used to fund the ROTH could be gifted to the child.